Volkswagen AG
Volkswagen electric under the hood

VW Weighs Battery Partnership with Panasonic, LG Chem

July 8, 2016
Volkswagen is also considering locations for making those batteries — with an expectant sales volume of 2 million to 3 million electric cars by 2025 in mind.

Volkswagen AG is considering teaming up with electric-car battery specialists such as LG Chem Ltd. or Panasonic Corp. as it overhauls its strategy to emerge from its diesel-emissions scandal, according to people familiar with the matter.

The carmaker’s supervisory board also discussed investing 1.7 billion euros to 2 billion euros ($1.87 billion to $2.21 billion) per factory at several sites around the world, said the people, who asked not to be identified because the talks are confidential. Concrete decisions are expected by the end of the year, they said.

Volkswagen confirmed that it’s examining options and considering multiple locations to make batteries for a sales volume of between 2 million and 3 million purely electric-powered cars by 2025, declining to comment on details of the potential sites. The push is part of CEO Matthias Mueller’s attempt to move beyond last year’s admission to systematic cheating on diesel pollution controls.

“For a global manufacturer like Volkswagen, we surely wouldn’t just talk about one site, but about several assembly facilities to serve the most important production locations,” the company said in an e-mailed response to questions. It’s too soon to say where the factories will be situated, Volkswagen said.

Chinese electric-vehicle subsidies will probably drive growth in the battery market, now 80% controlled by four Asian companies including Panasonic and LG Chem, Deutsche Bank analysts wrote in a report last month. Volkswagen would need as much as a decade to catch up with established players, even as falling battery prices remove some of the incentive for a large capital investment, the analysts wrote.

“This should be a combined industry effort,” potentially through joint ventures between battery makers and auto suppliers, the analysts wrote.

Spokesmen from Panasonic and LG Chem declined to comment.

Matching rivals including Toyota Motor Corp. and Nissan Motor Co. on electric cars is a cornerstone of Volkswagen’s effort to rebound from the emissions crisis, the worst in its corporate history. Mueller’s 2025 road map also envisions Volkswagen reaching a leadership position in technology for self-driving cars and mobility services such as ride-sharing.

“Battery technology is a key competence for electric mobility, which will see its breakthrough toward a mass market in coming years,” Volkswagen said. Sales of as many as 3 million electric cars by 2025 imply “the necessity to look intensively into this issue.”

By Christoph Rauwald, with assistance from Pavel Alpeyev and Sohee Kim.

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Licensed content from Bloomberg, copyright 2016.

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